Global Market Mechanisms for Biodiversity and Ecosystem Services

1. Global Market Mechanisms for Biodiversity and Ecosystem Services Graciela Chichilnisky Columbia University May 8 2008

2. Overriding Objective • A global market mechanism must create economic incentives for Sustainable Development • ‘Price signals’ and market solutions • Encouraging human activity that creates wealth and welfare • And is harmonious with the environment

3. The Kyoto Protocol shows the way • A Successful Global Market Mechanism: The ‘Carbon Market’ of the Kyoto Protocol

4. The Carbon Market • Carbon Price signal - rewards carbon reduction & penalizes excessive emissions • Self funded - requires no donations to execute • Reduces the gap between the poor and the rich nations – the Global Divide (Article IV of 1992 Climate Convention) • In 2006 CDM executed $9 billion in transfers for productive investment in developing nations reducing 30% EU annual emissions

5. Four Operating Principles A successful Global Market Mechanism must satisfy these four operating principles: • 1. Foster Sustainable development • 2. Be Self funded - requires no donations to execute • 3. Reduce the gap between the poor and the rich nations – the Global Divide • 4. Transfer productive resources to lowest income communities

6. Global Market Mechanism: Global Watershed Fund • Aggregates the services of large numbers of watersheds across the world, bundled into one global financial asset: global watershed services • Public-Private corporation owns rights to watershed services with strict covenants. Sells bonds and equity to be self funded • Public - Private corporation owns and profits from the savings created by using ecosystem services rather than artificial plants to capture and filtrate water destined to cities >1 million population • Corporation, land & resources owned by local communities • Covenants to restrict and manage residential, commercial and agricultural use of watersheds • Financial asset (bonds, equity of corporation) sold in the global capital markets – Water Hedge Funds – IPOs and secondary markets.

7. Global Biodiversity Fund • Aggregates the services of large numbers of forests across the world, bundled into one global financial asset: global prospecting services • Public-Private corporation owns rights to forest biodiversity services with strict covenants. Sells bonds and equity to be self funded • Public - Private corporation owns and profits from bio prospecting services (Costa Rica’s example) • Corporation, land & resources owned by local communities • Covenants to restrict and manage residential, commercial and agricultural use of forests • Financial asset (bonds, equity of corporation) sold in the global capital markets – Forest Hedge Funds – IPOs and secondary markets.

8. DNA - Indigenous Knowledge • Digital Data Base to avoid permanent loss of verbally transmitted indigenous knowledge • Indigenous knowledge threatened by the segmentation of traditional communities & encroachment of industrial societies. • Data Base records original source & ensures licensing revenues • Replacing patents by compulsory licenses • Knowledge owned by the originating sources – Public Private Corporation sells knowledge services to private sector. • Medicinal knowledge alone represents $100 billion in annual sales for pharmaceutical companies • Data base development encourages digital training and job creation for indigenous youngsters, mentored by communities elders • Bonds and Shares in Public - Private corporation are sold in global capital markets, IPOs. • Knowledge owned by communities, Public – Private corporation owns rights to sell services from indigenous knowledge.

9. The Global Spectrum • Creation of property rights for the global spectrum • Owned by each nation within its territory • Create Private-Public corporation(s) to exploit the services of the global spectrum • Owned as appropriate by local communities, with bonds and shares sold in global capital markets • Developing nations (e.g. Latin America) are the largest expansion market for wireless services in the world today

10. References • Chichilnisky, G: Development and Global Finance: the case for an International Bank for Environmental Settlements UNDP and UNESCO, New York 1996, in ww.chichilnisky.com - publications